With the worsening economy and state budget deficits, states are increasingly considering adding sales tax to online retail transactions. Legislation could be implemented as soon as 2009, according to Forbes.

“States are coming up with huge deficits and looking for places to make money,” says Eric Menhart of CyberLaw. “All of a sudden, Internet taxation appears a lot more viable.”

The legislation will be introduced as soon as January; if passed, changes could be implemented within six months. It is estimated that these taxes would generate several billion dollars in revenue: the Streamlined Sales Tax Governing Board (SSTGB) estimates that uncollected sales tax revenue was between $19 and $27 billion in 2006.

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China is enforcing a 20 percent tax on virtual goods, a $1.45 billion (10 billion yuan) a year market.  The measure “specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up”.

The tax specifically targets “gold farmers”, who collect in-game items in order to sell them at a mark-up. Characters, spells, and items can be sold for thousands of dollars on eBay and other auction sites.

A study by Manchester University this year estimates that gold farming is a $500 million industry. 80 percent of that industry, 400,000 people, is based in China.

Legislation of the virtual world is becoming increasingly complex.

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For a long time, people thought Silicon Valley was recession proof. The last two weeks have made it apparent that that is not the case. At least dozens of tech companies - including Adbrite, eBay, Zillow, Pandora - have announced layoffs in October, most of them in the last two weeks.

“The next big thing in IT is not a technology — it is cost reduction, risk management and compliance,” said Gartner’s Peter Sondergaard. Gartner projects budget cuts of up to 20% at some companies.

Yahoo! is expected to cut more jobs than initially announced in January; that announcement could come as early as today. The cuts are expected to cost more than 1000 jobs.

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An Internet censorship specialist revealed on Wednesday that TOM-Skype, the Chinese partnership of eBay’s Skype, is monitoring and storing text chats. Skype is a widely used messaging and voice chat service that identifies itself as being secure for communication due to its encryption technology. China’s government set keywords to flag messages on the service, where they would be analyzed for IP addresses and usernames. This information was stored insecurely, leading to its discovery by Canadian researcher Nart Villeneuve at the University of Toronto.

“Skype encryption ensures that no other party can eavesdrop on your call or read your instant messages.” says their security page , but has a policy of responding to “lawful requests from relevant authorities.”  The FBI wants telephone tapping laws on communication services like Skype, but these do not apply to instant text messages that skip the phone system entirely. The Chinese version of Skype allows surveillance of messages with flagged keywords, some of which include “democracy” and “Tibet.”

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After a strong second half Monday, tech stocks continued their free fall Tuesday. We’re really starting to get an idea of how analysts erred on the side of optimism believing the technology sector was insulated from the market’s troubles.

At the 4:00 pm trading deadline, Dell had dropped 6.39%, from 15.04 to 13.55. Apple fell 9.15% to 89.16, Microsoft dropped 6.74% to 23.23, and Cisco ended the day at 18.84, down 7.92 from Monday’s close.  Sun Microsystems dropped 10.45%, from 6.61.

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EBay announced Monday that it plans to cut its global workforce of 16,000 by 10%, which is expected to save the company around $150 million a year. This is the first time they’ve had to lay off employees, though rumors of impending layoffs have been circulating for nearly a year.

Silicon Valley Insider calls these cuts “long overdue.”

“Unless the company can rapidly begin to reaccelerate gross merchandise sales, moreover, more cuts should follow.”

EBay shares closed at $17.89 Monday, their lowest in nearly six years.

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Affinion Security Center (ASC) launched last week a new service that fights identity theft — after it happens. IdentitySecure monitors hacker market places and alerts you if your data comes up for sale.

“While breaches are often unavoidable, IdentitySecure provides the proactive searches, early detection and recovery assistance.”

ASC recognizes that our personal data is often out of our control. While we can do what we can to protect our it, there’s always the chance of it being obtained from a third party, as happened recently when a hard drive containing the personal information of over a million bank customers was sold on eBay.

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MoneyAisle (moneyaisle.com) is a real-time “reverse-auction” site that allows customers to find the best certificate of deposit (CD) and high-yield savings account rates. It is the first service from Burlington, MA startup NeoSaej.

According to NeoSaej CEO Mukesh Chatter, the process reverses that of bidding sites like eBay. “MoneyAisle differs from other online auction sites, which are seller-centric, by providing buyer-centric auctions to consumers. Many sellers (banks) compete and the buyer ultimately benefits, reversing traditional seller-centric online auction methods, used by sites such as eBay,” says the company’s website.

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Intel and Yahoo have announced the Widget Channel, which will bring internet widgets to the TV set.

The Widget Channel, unveiled Wednesday at the Intel Developers Forum in San Francisco, is an interactive “snippet bar” at the bottom of the TV screen that shows weather, news, sports scores, stock prices, and Flickr photos, among (potentially) myriad other things.

Like Apple’s App Store, widgets will be available for download to TVs. Yahoo and Intel plan on releasing the development kit, which could be exactly what makes the Widget Channel a success. The participation of a heterogeneous and experimental development crowd could ensure that something potentially this awkward actually works.

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The Great 3G geek-out is starting to make Harry Potter fans look cool. Watching the whole thing unfold has been very amusing and kind of amazing.

Apple [APPL] reports that one million iPhone 3Gs were sold in the phone’s first weekend – more than twice the originally predicted sales of 450,000 – for an estimated 330 million dollars. In comparison, the original iPhone took 74 days to reach a million sales.

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